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Beige Book: Economic deceleration driven by Delta variant’s rise

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Yahoo Finance’s Ines Ferre breaks down the Federal Reserve’s Beige Book.

Video Transcript

ALEXIS CHRISTOFOUROS: I want to get to the Beige Book now, the Federal Reserve's look at economic conditions in pockets of our country. Yahoo Finance's Ines Ferre here now to break that report down for us. So what did the Fed see in some of these major cities, Ines?

INES FERRE: Well, Alexis, on the overall economic activity, the Federal Reserve is saying that the economic growth down-shifted slightly in a moderate pace in early July through August. The stronger sectors of the economy included manufacturing, transportation. The deceleration in economic activity was largely attributed to a pullback in dining out, in travel and tourism in most districts.

Also the Federal Reserve saying that the other sectors of the economy where activity declined were those they saw constrained by supply disruption, so those supply disruptions that we've been talking about for months now, and also labor shortages, not softening demand but labor shortages.

Taking a look at what they said about wages and employment, all districts reporting that they're seeing a rise in employment overall. But demand for workers continues to strengthen. But all districts noting extensive labor shortages that were constraining employment and, in many cases, impeding economic business activity that is. Contributing to these shortages or increased turnover, early retirement, and child care needs, some of these issues that we've talked about on this show, child care needs being one of them, for people not really going back to work yet.

With persistent and extensive labor shortages, the report says that a number of districts reported on acceleration in wages. So definitely seeing those wages tick higher, as we've seen over the last several months.

And then on prices, inflation was reported to be steady at an elevated pace. And most districts noting substantial escalation in the cost of metals and metal-based products. Lumber costs have come down. And some districts reporting that businesses are finding it easier to pass along the cost increases through higher prices. And in fact, several saying that businesses are anticipating a significant hike in their selling prices in the months ahead. So you can expect prices to be higher for consumers.

ALEXIS CHRISTOFOUROS: Oh, fantastic. We were just talking to Jared about what the Biden administration is trying to do to sort of pull in the reins on some of these meat producers and get rid of some of the sticker shock we're seeing there in the meat aisle. But we'll keep an eye on it. Ines Ferre, thanks so much.

Time now for our ETF report brought to you by Invesco QQQ.